On 8 December 2022, the European Commission published the proposals to amend the VAT Directive and other related legislation with respect to the VAT in the Digital Age ('ViDA'). It is the intention that most changes will enter into force as of 1 January 2025. Please note that the proposals should be approved first by all EU Member States before entering into force.

The new rules, if entered into force, will impact all companies involved in international trade and e-commerce, mainly due to e-invoicing and digital reporting requirements.

The three main topics of ViDA are:

  1. The Single VAT registration in the EU to mitigate the registration obligations for specific transactions in other EU Member States. This will be implemented by extending the scope of the One Stop Shop (OSS).
  2. The platform economy. In this respect, the deemed supplier provision will be extended for most supplies of goods. In addition, a new deemed supplier provision will be introduced for passenger transport services and short-term accommodation rental.
  3. The Digital Reporting Requirements and the use of mandatory e-invoicing for cross-border transactions.

Impact

We recommend businesses to obtain a good understanding of these proposed rules to determine whether internal processes have to be amended and review whether the VAT compliance position will be mitigated or increased. In this respect, potentially IT changes are required to comply with this new proposed legislation. Our VAT specialists are happy to discuss the potential impact with you. Please find the more detailed overview of the proposed changes below.

The OSS will be extended to a single VAT registration

After the, according to the EU successfully, implementation of the OSS scheme’s as of 1 July 2021, the EU proposed with ViDA to extend the OSS by introducing the Single VAT registration (SVR).

The SVR provides a modification and clarification to the existing e-commerce package currently implemented. With SVR the EU is moving towards taxation based on the destination principle. Therefore, the definition of an intra-EU distance sale will also cover second-hand goods, works of arts, collectors’ items and antiques.

The current One Stop Shop scheme for intra-EU distance sales and B2C services taxable in the EU Member State of destination will be extended to:

  • domestic supplies;
  • the supply of goods with installation or assembly;
  • the supply of goods on board of ships, aircrafts or trains; and
  • the supply of gas, electricity, heating and cooling;

When VAT is due in another Member State than where the supplier is established and the recipient meets strict conditions regarding its VAT status.

In addition, for the intra-Community distance sales of second-hand goods, antiques, work of arts, and collector items whereby the margin scheme is applied, the OSS can be applied.

The Import One Stop Shop (iOSS) scheme will also be amended, as the use of the IOSS will be made mandatory for electronic interfaces facilitating as a deemed supplier for certain distance sales of imported goods. Currently deemed suppliers can opt to use this scheme, however due to this change as of 1 January 2025 these deemed suppliers will be obligated to apply the IOSS scheme. To meet the deemed supplier, the EU will implement additional regulations to prevent the misuse of the IOSS number and mitigate the exclusion rules for the IOSS scheme.

In addition to the changes for the (I)OSS the EU is implementing a new special scheme for the transfer of own goods. This scheme will allow companies to report transfers of own goods within the EU to be reported in one return. The use of this special scheme may prevent the requirement for businesses to VAT register in other EU Member States. Currently, if a business holds stock in another Member State, a foreign VAT registration in that respective Member State is required to report the acquisition of goods due to the transfer or own goods and if applicable, report domestic supplies of goods in that Member State..Due to the proposed changes, the acquisition of goods due to the transfer of own goods can be reported using the special scheme. If VAT is due on domestic B2C supplies of goods, this can be reported in the OSS return.

The changes relating to the Single VAT Registration are proposed to enter into force as of 1 January 2025.

The platform economy

As of 1 July 2021, a deemed supplier provision was introduced for the B2C e-commerce supplies of goods. In the new proposal the EU is proposing to extend the deemed supplier provision for certain services. This will result in additional VAT compliance and risks for platforms which are considered a deemed supplier.

The deemed supplier provision will be implemented specifically for the short-term accommodation rental, and passenger transport sectors of the platform economy. Under these new measures, if the supplier of the service on the platforms does not charge VAT, because they are not a VAT taxable person or they apply a small enterprises scheme, the platform will need to charge and account for the VAT on the supply of the service.

Even if the supplier does charge VAT and therefore the deemed supplier regime would not be applicable a platform will be obligated to keep records relating to both the B2B and the B2C services and upon request report the information to the tax authorities, adding an additional burden to platforms.

In addition, the EU is extending the definition of the deemed supplier provision relating to goods. Based on the proposed change of the definition, it will constitute supplies of goods within the EU facilitated by an electronic interface, irrespective of where the underlying supplier is established and the status of the purchaser. This change would have considerable impact on platforms that allow third party sellers, as based on the new definition the platform is deemed to have received and supplied those goods. Therefore, the platform would be liable to report and pay the VAT to the respective tax authorities.

These proposed changes will also have major impact on companies that have platforms supplying services, as they will need to verify the VAT status of the sellers on their platform and have potential additional VAT obligations. Currently the implementation deadline for the deemed supplier regime for platforms is set on 1 January 2025. Due to the potential impact platforms should take action in time to ensure being compliant as of 1 January 2025.

(Almost real-time) Digital reporting requirements and E-invoicing

The EU concluded that the current system for the reporting of intra-Community transactions is not sufficient for Member States to prevent VAT fraud. Therefore, the EU has proposed an extensive change to the reporting system and the invoicing.

  • Currently an invoice needs to be issued no later than the 15th day of the month following the month  the supply of the goods or service takes place. For intra-Community supplies for example, a deviating period will be introduced. For these supplies, an (electronic) invoice needs to be issued two days after the supply takes place.
  • In addition, the current EU VAT Directive allowed a summary invoice to be issued for a period at least once a month. This simplification will be removed under the proposed change to be in line with the change of the invoicing deadline mentioned above.
  • Also, the content of the invoice will be updated to ensure that all information required by the Member States is to be included. The following requirements will be added to the invoice requirements:
    • the identifier of the bank account in which the payment for the invoice will be credited;
    • the agreed dates and amount of each payment relating to a transaction;
    • and in case an invoice that amends the initial invoice is issued, the identification of that initial invoice.

To process all this information a new digital reporting system for intra-Community transactions will be created. The new digital reporting system for the intra-Community transactions will cover the same transactions that are currently covered by the recapitulative statement (EC Sales Listing) except for the call-off stock, which will cease to exist. The new system requires a transaction-by-transaction filing and requires more extensive information than the current EC Sales Listing. In addition, the filing deadline for the electronic transmission of the data is only two working days after the issuance of the invoice, or after the date the invoice should have been issued.

The proposed (almost) real-time reporting for cross-border transactions will be obligatory. For the domestic supplies, EU Member States have the freedom to implement digital reporting obligations.  Currently it is unknown which additional Member States will be implementing a digital reporting system for domestic transactions.

The changes relating to e-invoicing and digital reporting are proposed to enter into force as of 1 January 2028.